Welspun Approached to Sell Security Backed by Solar Revenue

By Natalie Obiko Pearson -
Dec 29, 2011

Welspun Energy Ltd., India’s biggest
solar photovoltaic developer, was approached by a bank proposing
to use revenue from its first plant to create a security of the
kind often used to raise funds for projects such as toll roads.

“While solar energy generation is a relatively new sector
for banks, they’re interested in lending to those who have
established credibility and lived up to their commitments,”
said Vineet Mittal, managing director of Welspun Energy.

The energy unit of Welspun Group, which is backed by Apollo
Global Management LLC co-founder Leon Black, gained interest to
securitize revenue from its 15-megawatt unit in Gujurat after
three months of operation, Mittal said, declining to identify
the bank. Investors would be paid income from the solar revenue.

The first main batch of solar plants in India are nearing
completion, spurring banks to explore ways to securitize their
cash flows as they do with tolls from infrastructure projects
such as roads, Mittal said in an interview in Mumbai.

First Solar Inc. (FSLR) and Suntech Power Holdings Inc. (STP) are among
companies expecting India to become one of the fastest growing
markets, countering faltering demand and shrinking clean-energy
subsidies in a Europe weakened by a sovereign debt crisis. The
banks’ increased interest would help overcome one of the biggest
challenges for Indian solar developers, who last year struggled
to win over lenders to an industry still in its infancy.

Solar Like Highways

Solar plants, like other infrastructure, lend themselves to
securitization as cash flows are steady and predictable, said
Vinayak Mavinkurve, project finance group head at Infrastructure
Development Finance Co. (IDFC), which funds Indian power stations.

“When you compare a wind, solar or road asset, you know
what the toll is if your car passes through, you know what the
solar or wind price is for every unit that’s delivered,” he
said in July. “It’s like an annuity. What’s your variable? It’s
the amount of wind or sun or traffic flow on a highway.”

Private equity also has a “huge interest” in renewables
in India, especially solar and wind, Mittal said. Apollo Global (APO)
in August bought a 22.5 billion rupee ($424 million) stake in
Welspun Group, in the private-equity firm’s biggest Indian deal.

Welspun Energy is planning its first wind farm investments,
with sites obtained in Karnataka, Rajasthan and Gujarat states,
and is targeting 500 megawatts of solar and wind capacity in
India by 2014, Mittal said. It also signed an agreement with
Gujarat to build as much as 100 megawatts of solar plants and
will bid for projects in Karnataka, Rajasthan and Orissa.

Wind Foray

The company, which won bidding for 55 megawatts of solar
photovoltaic capacity in two central government auctions, more
than any other company, completed its first 15-megawatt plant in
Gujarat in October with financing from ICICI Bank Ltd. (ICICIBC)

It also expects to complete a 5-megawatt project in Andhra
Pradesh this week that’s financed by the Indian Overseas Bank.

Welspun Energy has used thin-film panels supplied by
German, Japanese and U.S. manufacturers, Mittal said. It may use
thin-film or crystalline panels for its next 50 megawatts of
plants, scheduled to be built by January 2013 in Rajasthan.